How To Use DeFi Analytics Like a Pro (2024)

Investing in crypto is very similar to a lottery. You can buy 100 tickets, but there’s no guarantee that any of them can make you a millionaire overnight.

With new DeFi solutions popping up like mushrooms, a good portion of luck is the most important factor to make an investor successful. Yet, if you treat DeFi analytics with due diligence, you may significantly increase your chances.

Luckily, analytics tools are aplenty. Now it remains the case for small - to learn to use them efficiently.

Key Takeaways

• DeFi analytics relies on the public data that most blockchains provide thanks to their transparent nature.
• Blockchain explorers accumulate large volumes of analytical data but may be difficult for crypto novices.
• DeFi analytics dashboards are more user-friendly as they offer many different graphs and reports aiming to facilitate the research process.
• Those who want to invest in non-fungible tokens, may use NFT trackers to analyze token rarity and to track portfolios of successful investors.
• The best metrics to start the analysis with are TVL, liquidity, and yield.

What are DeFi Analytics?

DeFi analytics refers to the process of collecting and processing blockchain data for its further analysis.

Most public blockchains maintain records of all transactions and smart contracts in a transparent and immutable form. At this, there are hundreds or thousands of independent validators distributed across different regions to prove the veracity of this information.

This makes the cryptocurrency market data pretty accurate and enables any interested party to freely collect and analyze it.

How To Use DeFi Analytics

Blockchain analytics can provide savvy investors with meaningful information about what’s going on with specific DeFi projects, decentralized financial services, or the whole blockchain industry.

For example, one may use DeFi tools to track the portfolios of experienced investors or monitor the movements of funds across DEXes.

But where does this data come from? Well, there are a few sources to look out for.

Blockchain explorers

First, there are blockchain explorers. These are websites or pieces of software for visualizing transactions, blocks, and other metrics stored on the blockchain. 

As they collect and store raw blockchain data, they represent the first and the best option for those who want to get involved in DeFi analytics.

Typically, one blockchain explorer contains information specific to one network. For example, Etherscan features Ethereum data while PulseScan is the main explorer for PulseChain.

How to Use Blockchain Explorers?

Blockchain explorers can be helpful in many different scenarios. Here are just a few of the most popular use cases:

• Transaction status. When you send digital assets to someone else, you can use blockchain explorers to share the link with the recipient proving that the transaction has been successful. 
• Metrics of your personal address. Blockchain explorers can help you track the data associated with your personal wallet. With their help, you may check the whole history of your transactions, your current balances, the amount of money you currently possess, and much more.
• Whales’ wallets. Knowing the public addresses of large cryptocurrency investors or media personas (e.g. Satoshi Nakamoto), you may monitor any changes to adjust your investing strategy. 
• Technical information. If you are a blockchain enthusiast, you may use the data provided by block explorers to analyze how a given network operates in general. At this, you may track its hash rate, block difficulty, block height, transaction fees, etc.

Also, it’s worth adding that the information that block explorers provide depends on the architecture of underlying networks. 

At this, PoS-based networks will have indices different from PoW-based ones. Yet, the overall principles are the same.

DeFi Analytics Dashboards

While block explorers contain a plethora of blockchain statistics, they may look rather complicated, especially for crypto novices.

Those who look for user-friendly reports may try using DeFi analytics services that offer reports for all occasions. We’ve listed some of them below.

1. DefiLlama

This DeFi analytics platform offers a large variety of free graphs and statistics for all occasions. 

It combines data about different chains such as Ethereum, Arbitrum, Avalanche, Polygon, Optimism, and much more. With its user-friendly dashboard, it provides information about top DeFi protocols, crypto airdrops, NFTs, blockchain oracles, and many other aspects that investors and crypto researchers can make use of.

2. DappRadar

DappRadar is another popular DeFi analytics tool that combines statistics about more than 3,000 decentralized applications within a single interface. 

Striving to make data analysis easier for its users, the platform represents information about DeFi tokens, airdrops, NFTs, and other digital assets in the form of comprehensive graphs and tables.

The Pro membership offers some extra perks and features such as custom alerts, enhanced data, and advanced filters. To participate, one must stake at least 30,000 RADAR which is a native token of the project.

3. Dune Analytics

Dune is one more popular platform designed for blockchain analysis with a focus on data visualization. 

While it offers many user-friendly reports out-of-the-box, it can also generate custom charts and dashboards through SQL queries. At this, Dune features many reports created by the community for public usage.

For example, there is a dashboard with an overall DEX metrics displaying market share of popular DEXes and their weekly and daily trading volume.

NFT Trackers

NFTs have completely revolutionalized digital ownership. With the surging popularity of this new asset class, many analytical services have emerged aiming to help investors keep track of the NFT market.

In order to find the best NFTs, investors should analyze many different factors. They have to identify the rarity of every given asset or collection, find the number of assets that make up a collection, make a thorough research on the collection creator, and much more.

At this, NFT trackers as a subsection of DeFi analytics dashboards can become a good source of information. Services like NFT OnChained and Oxalus can be of great help here. 

Also, such services as Kubera and the aforementioned DappRadar can help in monitoring the wallets of top-performing investors in real time.

DeFi Metrics to Look For

With such an abundance of analytics tools, it may be difficult to identify which metrics are the most important. 

Of course, there is no magic pill to fit everyone. Different goals define different metrics which is nothing but natural. Yet, there are some indices that are worth investigating in any case. 

TVL

Total value locked (TVL) is the metric that demonstrates the overall value of crypto deposited in a given blockchain or a DeFi product. This is one of the most crucial aspects to evaluate when assessing the health status of any blockchain system. 

Keep in mind though, that TVL is only good in conjunction with other metrics. This index can be easily manipulated and thus mislead investors.

Liquidity

Applied to crypto, liquidity reflects the speed and complexity of exchanging one digital asset for another. At this, transactions shouldn’t have any major effect on the price of an asset or the overall stability of a given pool.

Assets with low liquidity may be difficult to get rid of. In such occasions, even low-volume transactions may significantly impact the asset price and result in money losses.

In order to correctly assess this metric, you may investigate the following factors:

1. Trading volume. The higher the number of market participants engaged with trading on a given platform, the higher its liquidity. As more traders join a specific pool, the trading volume in this pool increases.
2. Bid-ask spread. Order books may serve as a good source of DeFi analytics. They show the difference between the bid and the ask prices and thus make it possible to assess their liquidity.

Yields

Staking assets in DeFi protocols enables cryptocurrency investors to earn interest rates. As a single investor may stake crypto in many protocols, the term yield refers to the final ROI that he or she obtains across all the pools.

The size of the yield usually correlates with the level of risk.

Closing Thoughts

The mantra DYOR (Do Your Own Research) is, perhaps, the most popular among blockchain gurus. Indeed, there is no magician to tell you which of the DeFi tokens will surely grow in the long-term perspective and which ones will fail.

Yet, you may become your own wizard by investigating the data available in DeFi analytics. Reading graphs and schemes doesn’t require any magic, only diligence and skills.